This direction for "Apple TV" is vastly superior to entering the commoditized flat screen market. Let Sony, Sharp, Vizio, et al fight over the big box.
That market stinks, with low margins, high stocking and shipping expenses, and a generalized lack of enthusiasm amongst customers to upgrade. Just getting the new set attached to the wall and the old set disposed of is a huge hassle and is inconsistent with the typical Apple upgrade cycle. Stay away from the big set and sell an iPhone sized accessory that can link to any communications capable monitor.
have you ever owned an apple product? even if you haven't, are you *still* not yet aware that apple's goal is *always* to do things better than anyone else has previously?
every issue you cited assumes (erroneously) one thing: that an apple-branded TV would be just like every other company's TVs. you seem to forget that apple is in the business of *revolutionizing* products. every single aspect of an apple TV would have been rethought -- right down to some new and simple way to affix it to one's wall. apple's goal would be to eliminate *everything* that you currently consider to be a hassle.
everything you mentioned is true *only* for TVs as we already know them. by your logic, apple should have stayed out of the mobile-phone space, as well. because -- you know -- "phones suck. let other companies fight over that stuff." :-)